2010 council newdelhi_ifa_outlook


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2010 council newdelhi_ifa_outlook

  1. 1. A/10/170 December 201036th IFA Enlarged Council MeetingNew Delhi (India), 2-4 December 2010Short-Term Fertilizer Outlook2010-2011Patrick Heffer and Michel Prud’hommeInternational Fertilizer Industry Association (IFA)International Fertilizer Industry Association (IFA) – 28, rue Marbeuf – 75008 Paris – FranceTel. +33 1 53 93 05 00 – Fax +33 1 53 93 05 45/47 – ifa@fertilizer.org – www.fertilizer.orgCopyright © 2010 International Fertilizer Industry Association – All Rights Reserved
  2. 2. This Short-Term Fertilizer Outlook was prepared by Patrick Heffer, Director of the IFAAgriculture Service, and Michel Prud’homme, Director of the IFA Production andInternational Trade Service. It presents an overview of short-term prospects for worldagriculture and fertilizer demand, as well as the global fertilizer supply and trade situationin 2010 and 2011.This report is available to the general public on the IFA web site, or by request to the IFASecretariat.The Short-Term Fertilizer Outlook draws on the final versions of two IFA reports thpresented at the 36 IFA Enlarged Council Meeting held in New Delhi in December 2010:Short-Term Prospects for World Agriculture and Fertilizer Demand 2009/10-2011/12(A/10/169) and Global Fertilizer Supply and Trade 2010-2011 (A/10/149b). These twocomprehensive reports are restricted to IFA members only.The first part of the Short-Term Fertilizer Outlook looks at the global economic contextand agricultural situation. The second part provides updated fertilizer consumptionestimates for 2009/10 and demand forecasts for 2010/11 and 2011/12. The third partpresents IFA’s perspective on fertilizer supply and supply/demand balances for 2010 and2011. Copyright © 2010 International Fertilizer Industry Association - All Rights Reserved
  3. 3. PART 1 – GLOBAL ECONOMIC CONTEXT Another food crisis could be loomingAND AGRICULTURAL SITUATION On the policy side, the current focus in developed countries is on economic recovery and financial discipline. While the Doha Round of1.1. Global Context Trade Negotiations is still ongoing, it seems to be losing momentum. Climate change negotiators met in December in Cancún, but noEconomic growth is back, but recovery major breakthrough was achieved.remains fragile In developing countries, food security remainsAfter the worst recession since World War II, the high on the policy agenda. The number ofglobal economy is recovering. According to the undernourished people in the world surged toInternational Monetary Fund (IMF), world output more than one billion in 2009 due to the rapidis seen as firmly rebounding in 2010 (+4.8%), succession of the food crisis and the economicdriven by robust growth in emerging and downturn. With the economic recovery, thisdeveloping economies. However, the recovery number is forecast to be some 925 million inremains fragile, mostly because of high 2010, according to the Food and Agricultureunemployment, low consumer confidence, Organization of the United Nations (FAO). Thereduced household incomes, and high public recent increase in agricultural commodity anddebt in many of the advanced economies. As a food prices could create obstacles in the fight toconsequence, economic growth is expected to further reduce hunger, potentially leading tobe weaker in 2011 at +4.2%. The risks to the another food crisis.forecasts are mainly downside, at least until therequired reforms are completed. However, IMFestimates that these risks are appreciably lower 1.2. Agricultural Situationthan a year ago.With the economic recovery, prices of most Low grain production in the CIS and a UScommodities, including oil, minerals and maize harvest well below initial expectationsagricultural commodities, have remained firm or are driving the short-term agriculturalhave strengthened in 2010. outlookAfter a sharp contraction in 2009, international Aggregate global cereal and oilseed productiontrade is projected to fully recover in 2010 and reached a record in 2009 at 2,674 Mt, accordingwould further increase in 2011. The weak US to the United States Department of Agriculturedollar strongly affects the profitability of farming (USDA). The 2010 output is seen as contractingin countries with strong currencies. Farmers in by 2% to 2,621 million metric tonnes (Mt). Wheatthese countries are more reluctant to invest in and coarse grain crops are seen as down by 6fertilizers. and 2%, respectively, while rice production is anticipated to increase by 2%. Soybean output isUnfavourable weather causes short cereal forecast to contract by 2%, but this drop wouldharvests in the CIS and the USA be entirely offset by larger harvests for the otherSome of the major agricultural regions have oilseed crops. Sugar output is seen asbeen affected by unfavourable weather in 2010. increasing by 9%, and cotton production wouldThe succession of very hot and dry conditions in strongly rebound by 14%.the Commonwealth of Independent States (CIS),particularly Russia, and of hot and wet conditions World Cereal Production and Utilization (Mt)in the US Corn Belt have resulted in surgingwheat and maize prices in the second half of theyear. Weather conditions in the northernhemisphere during the winter cereal plantingseason have been relatively favourable so far inthe main producing areas, with the exception ofRussia and the USA. The moderate to strong LaNiña conditions observed since August areexpected to prevail through the first quarter of2011. Source: FAO 36th IFA Enlarged Council Meeting, New Delhi, December 2010 Short-Term Fertilizer Outlook 2010-2011, P. Heffer and M. Prud’homme, IFA
  4. 4. To meet world food, feed and bioenergy In addition, in the current unstable financialdemand, global cereal utilization is forecast to context, speculative funds are reinvesting inrise by some 2% in 2010/11. Because of tight agricultural commodities. Prices are likely tomarket conditions, coarse grain and wheat uses remain firm but volatile until the spring season inare seen as increasing more moderately than the northern hemisphere, as harvests in therice consumption. Oilseed consumption is southern hemisphere are unlikely to dramaticallyprojected to rise firmly, by almost 5%, with, in change the outlook. In these circumstances,particular, 7% growth in soybean uses. there are increasing concerns about another possible food crisis even if the prices of mostWorld cereal utilization is forecast to exceed commodities are still well below the levelsconsumption in 2010/11. World cereal reached in 2007/08. There are also fears that ainventories are projected to contract by 13% at new bubble and a sudden price setback couldthe end of the 2010/11 campaign. It is occur if speculative investments withdraw fromanticipated that stocks held by the major the agricultural commodity sector.exporters will be down by as much as 41% forcoarse grains and 16% for wheat. The world Relative Evolution of Selected Agriculturalcereal stock-to-use ratio is seen as dropping by Commodity Pricestwo percentage points to 22.5%, according to (base 100 = January 1995)FAO, and to 19.0%, according to USDA. Theprojected stock-to-use ratio for rice at the end ofthe campaign is considered satisfactory. The onefor wheat is declining but remains well above thelow level registered in 2007/08, while that forcoarse grains is close to its 15-year low. Theworld stock-to-use ratio for soybean is seen asdeclining by one percentage point, but wouldremain four percentage points above its low2008/09 level. The ratio for sugar would slightlyrebound after dropping for two consecutiveyears, while the ratio for cotton would remainalmost stable following an 18% contraction in2009/10. Sources: Financial Times, IMF and MPOB Global Cereal Stock-to-Use Ratio Farmers replenish their soil P and K reserves Current agricultural commodity prices provide strong incentives for farmers in market-oriented economies to invest in fertilizers and other intensification factors. In 2010 and probably in 2011, farmers will apply nitrogen (N) at higher rates to boost yields and will likely replenish their soil phosphorus (P) and potassium (K) reserves, which they have been mining in many parts of the world during the past Source: FAO two campaigns. P and K fertilizer consumption in countries with strong currencies relative to theIn the second half of 2010, the international US dollar will recover more slowly. In countriesprices of almost all agricultural commodities that are less or are not responsive to pricehave been increasing. This situation is driven by signals, such as China and India, policy makersconsecutive years of deficit for cotton and sugar, will likely encourage farmers to increasereduced export availabilities for wheat further to productivity in order to ensure domestic foodthe drought in the CIS and the export restrictions security.established by Russia and Ukraine, and a lowerthan expected maize yield in the USA. Oilseedprices follow this movement, as soybean willcompete with maize, wheat and cotton for land in2011. 36th IFA Enlarged Council Meeting, New Delhi, December 2010 Short-Term Fertilizer Outlook 2010-2011, P. Heffer and M. Prud’homme, IFA -2-
  5. 5. PART 2 – GLOBAL FERTILIZER DEMAND Provided the agricultural market fundamentals remain positive, global fertilizer demand in 2011/12 would continue to grow at sustained rates.Demand is rebounding firmly under theimpulsion of Asia and the Americas Aggregate demand is forecast to be up by 3.8% to 177.9 Mt. Demand for K would complete itsAfter a sharp drop in 2008/09 due to the financial recovery (+7.2%), to 29.4 Mt. Growth rates areand economic downturn, world fertilizer seen as more modest for N and P demand:consumption started to recover in 2009/10. +2.6% to 106.9 Mt for N, and +4.7% to 41.7 MtAggregate consumption in 2009/10 is estimated for P. Increases are anticipated in all the regions.to be up by 5.2% to 163.7 Mt nutrients. This isstill 4.2 Mt below the record in 2007/08 of 167.9 Projected Evolution of TotalMt. N fertilizer demand is estimated to have fully Regional Fertilizer Demand (Mt nutrients)recovered (+4.1%) to 102.6 Mt N, which is 2.1 Mtabove the previous record. P fertilizer demandstrongly rebounded (+11.5%) to 37.5 Mt P2O5,but remained 0.9 Mt below its record of twoyears earlier. K fertilizer demand remainedstable and depressed at 23.5 Mt K2O, i.e. 5.4 Mtbelow its previous record. Demand is estimatedto have increased in all the regions but LatinAmerica and Oceania. The largest changes involumes occurred in North America (+2.8 Mt),South Asia (+2.5 Mt), East Asia (+1.2 Mt), and Source: IFAWestern and Central Europe (+1.1 Mt). The baseline projections are subject to a number Global Fertilizer Consumption (Mt nutrients) N P2O5 K2O Total of uncertainties. To cope with these 07/08 100.5 38.4 28.9 167.9 uncertainties, upside and downside scenarios 08/09 98.5 33.7 23.5 155.6 have been developed for each nutrient. In 09/10 (e) 102.6 37.5 23.5 163.7 2010/11, upside and downside risks are seen to Change +4.1% +11.5% +0.3% +5.2% be of similar magnitude. In 2011/12, because a 10/11 (f) 104.2 39.8 27.4 171.4 rapid setback in agricultural commodity prices is Change +1.6% +6.0% +16.3% +4.7% possible, the risks appear to be mostly 11/12 (f) 106.9 41.7 29.4 177.9 downside. At the nutrient level, downside risks Change +2.6% +4.7% +7.2% +3.8% are proportionally greater for P and K than for N Source: IFA because farmers tend to reduce P and K (e) estimated (f) forecast applications before those of N. The level of uncertainty is also relatively higher for K, as theSupported by attractive agricultural commodity pace of recovery of K demand in China is difficultprices in the second half of 2010, total world to predict.fertilizer demand is forecast to rise firmly in2010/11 by 4.7% to 171.4 Mt. N demand wouldincrease by 1.6% and reach a new record at104.2 Mt. P demand would fully recover (+6.0%)to a new high at 39.8 Mt. K demand would PART 3 – GLOBAL FERTILIZER SUPPLYstrongly rebound (+16.3%) at 27.4 Mt, but wouldremain 1.6 Mt below the record of three yearsearlier. Total fertilizer demand is forecast to rise Global fertilizer demand in 2010 has been robustin all the regions but Eastern Europe and Central and widespread, driven by a strong rebound inAsia and West Asia. The largest increases in traditional markets where nutrient applicationvolume are seen in East Asia (+3.1 Mt), North was depressed in 2009 (Latin America, NorthAmerica (+1.5 Mt), Latin America (+1.3 Mt) and America, Oceania and West Europe) and aSouth Asia (+1.2 Mt). sustained level of consumption in emergingForecasts to 2011/12 are still very speculative. markets.They will be greatly influenced by the evolution The recovery in demand has been stronger thanof agricultural commodity prices, which are likely anticipated and has provided support for anto be highly volatile in 2011. increase in domestic sales and global trade. 36th IFA Enlarged Council Meeting, New Delhi, December 2010 Short-Term Fertilizer Outlook 2010-2011, P. Heffer and M. Prud’homme, IFA -3-
  6. 6. The depletion of most consumers’ stocks and the China’s export tariffs have been influential in thenear-empty distribution pipeline have led to global trade of urea and DAP. Extension of thestrong imports in large-consuming countries. At export tax scheme in 2010 created somethe supplier end, most producers have taken the windows of opportunity for Chinese exportersopportunity to reduce their own inventories. during the few months when tariffs were lower. Chinese exports of DAP and urea are expectedIn a full reversal of last year’s drop in global to reach near record levels in 2010. The currentsales and production, 2010 has seen record tax scheme is expected to be renewed, with anlevels of production and sales in a sharp V- extended high-tariff period.shaped recovery.Global total nutrient production in 2010 has Nitrogen Outlookconverged with world consumption, marking asignificant 11% rebound over 2009. Production The global nitrogen market has stronglyhas increased in all nutrient segments, but recovered from its dull performance in 2009,potash has registered the largest gain. Ammonia mainly on the back of firm domestic demand andproduction has increased by 4%, while urea sustained exports throughout 2010. Growth inoutput has expanded marginally. Phosphate rock nitrogen production and trade has beenproduction and that of phosphoric acid have supported by firm demand for urea and nitratesgrown in parallel, at the same rate of 10% over and, more importantly, stronger than expected2009. Potash production has increased by 57% recovery in the production and use of ammoniumover 2009, fully recovering from the depressed phosphate fertilizers.conditions existing since mid-2008. According to IFA estimates, world ammoniaGlobally, the fertilizer industry has operated at production in 2010 would show an important 4%82% of installed capacity, compared with 74% in increase over 2009 to 158.8 Mt. Global ammonia2009. While this indicates a rebound, it does not trade in 2010 has rebounded from last year’s 7%yet signal the emergence of a potential shortfall drop and has grown by 12% to 19.6 Mt NH3.in supply compared with 2007. Seaborne trade is estimated at 16.8 Mt. Global seaborne merchant ammonia capacity has shown a marginal net addition in 2010. It is projected to expand moderately in 2011 to 18.4 Mt. World ammonia capacity is projected to grow by 3% in 2011 to 200 Mt NH3. The supply and demand balances for nitrogen show a decreasing potential surplus, from 7.7 Mt N in 2009 to 5.1 Mt N in 2011.Global sales have increased by 13% over 2009due to robust recovery in potash deliveries.However, high global sales in late 2010 couldtranslate into a build-up of inventories in thedistribution pipeline by the end of the year. Totaluse of nutrients rose by 7% over 2009, reachinga record level of 215 Mt nutrients. Two-thirds ofthe year-on-year increase has come from thefertilizer sector.The main developments in international trade Global urea production in 2010 is estimated athave included robust recovery in imports of all 149 Mt product, representing a marginal 1%nutrients in Brazil, South-east Asia, India, the increase over 2009. The international urea tradeUnited States and West Europe and sustained is estimated at 38.5 Mt, a 6% increase overimport demand in Bangladesh and India. Exports 2009. Imports have increased in most regions,of phosphoric acid and sulphur have been notably Latin America, North America andstagnant. Oceania. 36th IFA Enlarged Council Meeting, New Delhi, December 2010 Short-Term Fertilizer Outlook 2010-2011, P. Heffer and M. Prud’homme, IFA -4-
  7. 7. Worldwide, close to 25 urea projects will providenew capacity in 2010 and 2011. IFA estimatesthat global urea capacity will be close to 181 Mtin 2010 and 190 Mt in 2011. China alone wouldcontribute 46% of the annual capacity increases.Taking into account a maximum operating rate of87% of installed nameplate capacity, it isestimated that world urea supply will increasefrom 157 Mt in 2010 to 164.2 Mt in 2011. Theglobal urea supply/demand balance shows anincrease in the potential surplus by the secondhalf of 2011, reaching 8.8 Mt product by the endof the year. Overall, the potential surplus wouldrepresent less than 5% of supply when idledplants are taken into account. Additional capacityin 2011 would add substantial tonnage of As regards MAP, DAP and TSP, globalexports, with at least 3 Mt of urea by the end of processed phosphates capacity would be close2011, equating to 9% of current global trade. to 35.7 Mt P2O5 in 2010 and 38.8 Mt in 2011. The main additions to capacity will occur in Brazil, China, Morocco and Saudi Arabia. Potash Outlook Global potash production in 2010 is estimated at 50.2 Mt MOP (equating to 31.1 Mt K2O), which represents a massive 58% increase over the depressed level of 2009. The potash industry has operated at 73% of its nameplate capacity, compared with 48% in 2009. Global potash sales have grown by 80% over 2009, reaching 52 Mt MOP, due to strong imports in Brazil, China, India, West Europe, South-east Asia and the United States Global potash capacity is projected to growPhosphate Outlook marginally, reaching 72.5 Mt product in 2010 and 74 Mt in 2011. Capacity would increase inThe world phosphate market has fully recovered Canada, Chile, Israel, Jordan and Russia. Globalfrom the low level of demand in 2008. effective capacity is forecast to be 39 Mt K2O byConsumption of phosphate products and raw the end of 2011. The derived potashmaterials has pushed production to near record supply/demand balances show a gradual declinelevels. IFA’s preliminary estimate of phosphate in the potential surpluses from 11.7 Mt K2O inrock production shows significant recovery in 2009 to 6.4 Mt K2O in 2011. The modestoutput, growing by 9.6% over 2009 to 177.8 Mt. increase in supply would be totally absorbed byExport volumes doubled during 2009 to reach new incremental demand.almost 30 Mt. Global production of phosphoricacid in 2010 was estimated at close to37 Mt P2O5, an increase of 3.4 Mt over 2009.Global phosphoric acid trade was firm in 2010,increasing by 9% to 4.8 Mt P2O5. The bulk of thisvolume went to India, which accounted for half ofglobal trade in merchant grade acid.No merchant acid capacity has come on streamin 2010. Global phosphoric acid capacity isprojected to expand by 3.3 Mt to 51 Mt P2O5 in2011 due to new projects in Brazil, China, SaudiArabia and Tunisia.Global phosphoric acid supply/demand points toan emerging tightness in 2011, as the potentialsurplus would decline to less than 1.7 Mt P2O5. 36th IFA Enlarged Council Meeting, New Delhi, December 2010 Short-Term Fertilizer Outlook 2010-2011, P. Heffer and M. Prud’homme, IFA -5-
  8. 8. Sulphur Outlook Trade and Sales Prospects in 2011World sulphur market conditions have improved Trade prospects for merchant ammonia,in 2010. Global output of elemental sulphur rose processed phosphates, potash and sulphur inby 7% to 51.9 Mt S. Demand would have shown 2011 are positive, with volumes growing by 4-8%similar growth, with a 7% increase to 50.1 Mt. over 2010. New urea capacity would lead toHowever, sulphur trade has been relatively reduced import demand in a few key consumingstatic. Firmness of demand, combined with lower countries, while large-export oriented facilitiesthan projected supply, has resulted in a static will add new exportable tonnage by mid-2011.balance. Global consumption of elemental New phosphate rock supply, especially forsulphur is projected to show robust growth in export, will come on stream in 2011.2011, on the back of strong demand in industrialsectors and firm fertilizer consumption. The Global nutrient sales for all uses is projected toglobal supply/demand balance in 2011 shows a grow by 2-3% in 2011, reaching 220-potential small surplus, ranging between 2 and 222 Mt nutrients, with increases of about 3% for3 Mt S and equating to 3% of total supply of nitrogen and phosphate products and up to 5%elemental sulphur. for potash. WORLD SUPPLY/DEMAND BALANCES: 2009 – 2010 – 2011 Products 2009 2010 2011 Nitrogen Supply 132.8 134.7 139.4 Mt N Demand 125.1 130.1 133.8 Potential balance +7.7 +4.5 +5.5 Urea Supply 153.2 157.0 164.1 Mt urea Demand 147.3 148.9 155.3 Potential balance +5.9 +8.0 +8.7 Phosphoric acid Supply 39.1 39.7 40.6 Mt P2O5 Demand 34.8 37.4 39.1 Potential balance +4.2 +2.2 +1.5 Potash Supply 37.1 37.8 38.6 Mt K2O Demand 25.4 30.2 32.6 Potential balance +11.6 +7.5 +6.3IFA Production and International Trade Committee – December 2010 36th IFA Enlarged Council Meeting, New Delhi, December 2010 Short-Term Fertilizer Outlook 2010-2011, P. Heffer and M. Prud’homme, IFA -6-